CNH - Chinese Yuan Renminbi

Importance of the Chinese Yuan Renminbi

The Chinese Yuan Renminbi is the currency used in the People’s Republic of China. It is divided into two different parts, the Chinese Yuan and the Renminbi. The first is the actual unit of currency for China’s financial system while the latter represents a unit of money. The Chinese currency was not popular in the global financial market because of the government's rigid controls. However, in 2016 the Renminbi took fifth place after the US Dollar, Euro, Yen, and British pound as the most used fiat currency. After a series of devaluations of the Chinese Currency, the CNH was added by the International Monetary Fund (IMF) as one of its reserve currencies in the special drawing rights (SDR) basket, giving the Chinese market a great boost since the CNH could be used for intergovernmental loans.

Introduction of the Chinese Yuan Renminbi

By the 1600s the most popular currency in Asia was the Spanish dollar or peso since the Spanish trading activity was very intense across the country. In 1800, the Chinese government launched a new currency system by issuing silver coins and banknotes called Yuan as an honor to the Yuan Dynasty. After the Chinese Revolution and the establishment of the Communist Party’s People’s Bank of China, the Yuan was replaced in 1949 by “the people’s currency” called Renminbi (RMB). In the 1955s Chinese government, the issue of social stability led China’s central bank to set 10,000 of the old Yuan equal to one new. Moreover, the Chinese government was responsible for setting the value of its money compared to the foreign currencies or the export prices to remain competitive. However, after 1990 the Chinese government was forced to let the Yuan float or to be adjusted according to the demand and supply.